Is the Housing Market Recovery Underway?

June 11, 2023

In the last year, we’ve been reporting on the state of the housing market, when an expected recovery might happen, and what that recovery might look like.

Going into 2023, many predicted that rates would begin dropping this year and that by the third quarter of the year, we could see big gains in mortgage rates and housing market improvement in general.

But in the last month of the second quarter, Q2, as it’s known in business circles, mortgage rates are still above seven percent, and the talk as Q3 approaches isn’t as promising as predicted last year.

Will mortgage loan interest rates ever fall back to earth? That’s a question on the minds of many trying to plan and decide their next move.

FHA Loan Mortgage Rates: When Will They Fall?

There have been a series of interest rate adjustments by the Fed that do not directly affect mortgage loan interest rates, but they made it more costly for lenders to loan money. Rising mortgage rates are the response to that cost increase.

The Fed hiked rates in May 2023 but retracted or deleted messaging about future hikes, which leads some in the mortgage industry to speculate that a rate hike pause is possible. Such a pause could be a factor in rates beginning to fall.

Recovery Into 2024?

CBS News reports that entities, including Fannie Mae and the Mortgage Bankers Association, “forecast that the average rate on 30-year fixed-rate mortgages will decline throughout 2023, continuing into the first quarter of 2024.”

Such a scenario is different from the predictions (made before the new year) that rates and the housing market could be in a recovery beginning in Q3. 

That isn’t to say that such a recovery is impossible or won’t happen, but the predictions of those in the housing market have gotten a bit more conservative. The CBS News report quotes Peter Idziak, a senior associate at Polunsky Beitel Green, a law firm for residential lenders. 

According to Idziak, if the Fed stops raising rates “because the data shows the economy weakening and inflation coming down further, then I would expect mortgage rates to decrease during the second half of 2023."

That’s a bit closer to the predictions made last year. Will it pan out?

Don’t Guess at When Rates Might Fall

If you are in the planning and saving stages of your home loan, there’s no reason to speed up that process in anticipation of an improving housing market. 

If you are currently moving into the house-hunting stage, the same rules apply. There is no way to realistically predict what may happen with rates, home prices, or associated costs as the economy improves--or treads water.

It’s best to use a strategy that gives you as much time as possible to save, work on your credit, and find the right lender. 

Conditions may or may not improve in the meantime, but your goal should be to get your credit and finances into good shape. Deciding when and how to commit to a home loan will come when you find the right home, the right price, and the right lender.

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